Math Problem Statement
If $12,000 had been invested in a certain investment fund on September 30, 2008, it would have been worth $56,946.68 on September 30, 2018. What interest rate, compounded annually, did this investment earn? (Round your answer to two decimal places.)
Solution
We are given that an initial investment of $12,000 grew to $56,946.68 over 10 years, and we need to find the annual interest rate, assuming the investment is compounded annually.
The formula for compound interest is:
Where:
- is the final amount (56,946.68),
- is the principal or initial amount (12,000),
- is the annual interest rate (the unknown),
- is the time in years (10 years).
Substitute the values into the formula:
Now, solve for :
Now take the 10th root of both sides:
Finally, subtract 1 to isolate :
Let me calculate that.The annual interest rate, compounded annually, is approximately 16.85%.
Would you like more details or further explanation?
Here are 5 related questions for further exploration:
- What would the investment have been worth after 15 years at the same interest rate?
- How does the formula for compound interest change if interest is compounded monthly instead of annually?
- What is the future value of an investment of $20,000 after 10 years at a 16.85% annual interest rate?
- How long would it take for an investment of $12,000 to double at a 16.85% annual interest rate?
- What would the interest rate be if the same investment grew to $100,000 in 10 years?
Tip: For a quick estimate of doubling time at a constant interest rate, you can use the "Rule of 72", which approximates the doubling time by dividing 72 by the annual interest rate.
Ask a new question for Free
By Image
Drop file here or Click Here to upload
Math Problem Analysis
Mathematical Concepts
Algebra
Compound Interest
Exponentiation
Formulas
Compound interest formula: A = P(1 + r)^t
Theorems
-
Suitable Grade Level
Grades 9-12
Related Recommendation
Find the Annual Interest Rate for a $14,000 Investment Over 8 Years with Compound Interest
Compound Interest on $12,000 at 10% Interest Compounded Quarterly for 7 Years
Calculate Compound Interest for $14,000 Invested at 12% Over 15 Years
Calculating the Interest Rate for an Investment of 27,750 Growing to 41,070 Over 6 Years
Find Annual Interest Rate for $16,000 Investment with Compound Interest